Expectation to reduce lending interest rates

Update: 17:06 | 22/02/2023

Deposit interest rates in the market have simultaneously decreased by a sharp 1-2% a year compared to the peak period (around November 2022). Businesses expect that this move will reduce lending interest rates in the near future to help support production and business.

Recent statistics from the State Bank of Vietnam (SBV) showed that the average deposit interest rate in Vietnam dong (VND) of domestic commercial banks at the end of December 2022 was at 0.2-0.6%/year for demand deposits and terms of less than 1 month; 5.3-5.8%/year for deposits with terms from 1 to 6 months; 6.2-7.6%/year for terms from 6 months to 12 months; and terms ranging from 12 months to 24 months were 6.0-7.4%/year. It can be seen that deposit interest rates have decreased compared to October and November 2022.

Reduce lending interest rates, Deposit interest rates,  simultaneously decreased, lending interest rates, support production and business

Customer transactions at a BIDV’s branch.

The report from Bao Viet Securities (BVSC) also showed that deposit interest rates were almost flat in January 2023 and showed signs of cooling down from the end of the month. Analysts at SSI Securities Company said that deposit interest rates for terms of more than 6 months have tended to decrease at some banks, with a decrease of around 0.5%. Currently, the deposit interest rates of popular banks are at 8-9.5% with ordinary deposits.

Similarly, the savings deposit interest rate applied from February 14 for individual customers at Sacombank is no longer anchored at the interest rate of 9%/year as last month. Currently, the deposit interest rate at Sacombank counters is 5.5-6%/year with a term of 1-5 months; 8-8.3%/year with a term of 6-11 months, and 8.4-8.65%/year with a term of 12-36 months. MSB also reduced deposit interest rates by 0.2-0.4%/year in some terms.

With the online channel, the interest rate for 15-36 month terms decreased by 0.4%/year to 9%/year; 12-month-term interest rates also decreased by 0.4% to 8.9%/year; and for a term of 6-11 months, the interest rate dropped to 8.8%/year. Notably, after the meeting with the SBV on February 8th, a number of large commercial banks met and agreed to reduce deposit interest rates in order to reduce lending rates.

With such signals, and the pressure to support the exchange rate ease, experts from BVSC believe that the pressure to raise interest rates will subside in 2023. Instead, monetary policy this year is likely to move towards supporting growth. BVSC expects interest rates to fall again in 2023 with clearer signs from the second quarter when the US Federal Reserve (FED) stopped raising interest rates and Vietnam's inflation cooled down.

In fact, high interest rates are a concern of businesses in this difficult period. Statistics of the SBV at the end of December 2022 showed that the average lending interest rate of domestic commercial banks for new and old loans with outstanding balances was at 9.0-10.7%/ year. The average short-term lending interest rate in VND for priority sectors is about 4.7%/year, which is lower than the maximum short-term lending rate prescribed by the SBV (5.5%/year).

The average USD lending interest rate of domestic commercial banks for new and old loans with outstanding balance is at 3.9-5.4%/year for short-term and 5.8-5.9%/year for medium and long-term. Meanwhile, according to the survey, the lending interest rate level of commercial banks in the market is currently lending popular interest rates is 12-13%/year for medium and long-term loans. The high lending interest rate has caused difficulties for production and business activities.

Therefore, right after deposit interest rates showed signs of cooling down, commercial banks made appropriate adjustments. MB Bank has applied a 1% reduction in lending interest rates for corporate customers with a turnover of less than 100 billion VND. BIDV also implemented a new short-term loan package with a scale of 30 trillion VND to serve production and business needs for customers, with preferential interest rates from 8%/year.

For customers who want to borrow money to buy houses or cars, consume or produce, and do business, BIDV has launched a new medium and long-term loan package with many incentives: loan interest rates from 10.3%/year in the first 12 months, and from 10.9%/year for 18 months from the time of first disbursement (for individual customers with medium and long-term loans under loan products for housing needs).

Specifically, when customers apply for medium and long-term loans at BIDV (loan period of more than 12 months), they will have the opportunity to receive additional incentives, including an additional 0.2% discount for home loan customers applying via the BIDV Home application or customers who receive their salary through BIDV.

Earlier, at the beginning of the year, Vietcombank was also the first commercial bank to announce a 0.5% reduction in lending interest rates for individual and institutional customers with existing and new outstanding loans at the bank, except for a group of clients operating in risky fields such as real estate, securities, etc.

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Source: NDO

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